First time home buyer needing some advice

[Anonymous]

Me and my wife are planning to purchase a home in the near future. We found a home we like but it is a short sale. We both have great credit. My middle score is 808 and hers is 782. We put an offer in on a house for $257,500 and wanting 3% back for closing costs. Bank countered with an acceptance of $257,000 but no closing costs. I talked to our lender and was hoping to have the closing costs rolled into the loan or something to avoid paying so much out of pocket. We are planning on putting 5% down. Our Loan officer got us a rate of 3.875% and is suggesting we do a one time payment upfront PMI payment which would be about $4500. So with the down payment, upfront PMI and closing costs we are out of pocket abotu 23,000 which is a little more than we were hoping for. We do have about $35,000 in savings.  

Just though I would ask here if anyone has any opinions on this or suggestions. Does this sound like a reasonable loan or should I shop around more?

Thanks in advance!!

[VALoanMaster]

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@Anonymous wrote:

Me and my wife are planning to purchase a home in the near future. We found a home we like but it is a short sale. We both have great credit. My middle score is 808 and hers is 782. We put an offer in on a house for $257,500 and wanting 3% back for closing costs. Bank countered with an acceptance of $257,000 but no closing costs. I talked to our lender and was hoping to have the closing costs rolled into the loan or something to avoid paying so much out of pocket. We are planning on putting 5% down. Our Loan officer got us a rate of 3.875% and is suggesting we do a one time payment upfront PMI payment which would be about $4500. So with the down payment, upfront PMI and closing costs we are out of pocket abotu 23,000 which is a little more than we were hoping for. We do have about $35,000 in savings.  

Just though I would ask here if anyone has any opinions on this or suggestions. Does this sound like a reasonable loan or should I shop around more?

Thanks in advance!!

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Hi Metalgod3082,

Get a second opinion. The lump sum PMI option really doesn't make sense to me & here's why. You cancel PMI once your principle balance hits 78% which on a 30 year amortization table would be around 7-10 years into the loan. That doesn't include appreciation so you could have an appraisal done in 3 or 4 years & get the PMI canceled as long as you have enough equity. The lump sum is non-refundable so even if you have enough equity to not need the PMI, you've already paid for it.

The lenders/PMI companies that roll out all of these exotic PMI options are doing so for the benefit of the consumer so review your options carefully before making a decision.

* The various PMI options do serve a purpose. For example: Let's say the monthly PMI puts your Debt To Income Ratio above what Fannie/Freddie allow but you have the ability to buy it out by paying it upfront., then it's a viable option in my opinion.

Good luck.